IndiGo sees 'formidable competition' as Tata buys Air India

India's largest airline IndiGo expects Tata Sons to be "formidable competition" once the conglomerate finalises its Rs180 billion ($3.2 billion) purchase of Air India from the government, the budget airline's chief executive said on Wednesday.

Tata also owns a majority stake in Vistara, a premium joint venture with Singapore Airlines, as well as budget airline AirAsia India.

"I see them as formidable competition but I welcome them. It is a sensible thing," said IndiGo CEO Ronojoy Dutta.

The Indian government announced on Friday that Tata would resume control of Air India, marking the end of years of struggle to privatise the financially troubled airline.

Tea-to-software Indian giant Tata is buying back Air India 89 years after founding it as Tata Air and half a century following its nationalisation.

"I think they (Air India) will become more economically responsible," said Mr Dutta. "Having a large player funded by taxpayers is not fair competition for us."

IndiGo controls more than half of the Indian domestic market but its international operations are far smaller than Air India's.

Mr Dutta said IndiGo was focused on flights within seven hours of India using narrow-body planes, while Air India was more focused on full-service long-haul operations, leaving plenty of room in the market for both.

The deal with Tata marks the end of a lengthy effort to privatise the heavily-indebted national carrier that, according to the Indian government, has eaten up Rs1.1 trillion ($20 billion) in public money since 2009.

The airline was founded in 1932, with the first flight piloted by Tata's eponymous chairman J.R.D. Tata himself, flying mail and passengers in a single-propeller de Havilland Puss Moth from Karachi to Bombay, as the city was known then.

Tata Air offered a slice of the high life with Bollywood actresses in its advertisements and at one point commissioning Spanish surrealist artist Salvador Dali to design its ashtrays. The airline was nationalised in the 1950s and in the decades that followed the Maharaja of the Skies became synonymous with the hopes and ambitions of the newly independent country.

"Welcome back, Air India," Tata's patriarch and chairman emeritus Ratan Tata tweeted last Friday, while admitting it "would take considerable effort to rebuild" the company.

"The airline at one time gained the reputation of being one of the most prestigious airlines in the world. Tatas will have the opportunity of regaining the image and reputation it enjoyed in earlier years," he said.

In the 1990s, Air India began to struggle with competition on domestic and international routes from Gulf carriers and no-frills airlines and it started amassing huge losses.

Successive Indian governments tried to privatise the company but its debts and New Delhi's insistence on retaining a stake put off would-be buyers.

Finally last year, Prime Minister Narendra Modi's government, seeking to sell a raft of state assets, agreed to take bids for the entire company but to retain some of what the airline owes.

Under the deal announced last Friday, Tata will take on around a quarter of Air India's dues of Rs615 billion, while the remainder will be transferred to a special-purpose vehicle.

Mr Mark D. Martin from Martin Consulting, an aviation consultancy, said that Tata should be able to absorb the additional debt.

"The transition from traditional to modern by the Tatas has been something of a case study and they've done a very good job. So, I don't think they'll have a problem with handling Air India," Mr Martin said.

"They've got deep pockets, they're well positioned and they are very strategic in their approach."

AFP, Reuters


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